Follow the money: How efficiently MLB teams spent money this season

It’s one thing for a Major League Baseball team to spend money in pursuit of wins and, presumably, a robust box office. Success can be elusive, however, as our rankings of how efficiently MLB teams spent money indicate.

With the 2012 season completed, it’s time to look at how well MLB did in translating payroll to win. Despite what many fans think, there’s not necessarily a correlation between payroll and winning: as any Chicago Cubs fan knows, spending money doesn’t guarantee a winning percentage. The more important measure is how efficiently a team managed their resources: coaxing the most wins for the least amount of money.

Not a bad measure: put together a young team with a low payroll, add a savvy older manager to the mix, and you’ve got a pretty good shot at making the playoffs. Conversely, if you’re a major-market team, you have a pretty good shot at spending enough to be competitive. Despite this year’s results, the Angels, Phillies and Red Sox are annual playoff contenders, so the cost-per-win numbers probably aren’t causing any loss of sleep for executives from those teams.

But there’s a better way to evaluate how well MLB spent their money. The late Doug Pappas put together a formula to measure Marginal Dollars per Marginal Win. The assumption is that a terrible team in baseball, made up entirely of minimum-wage players, would still manage to win a third of their games, so the true measure of success is how efficiently a team spent to procure wins past that minimum. In short, a successful team would spend the fewest marginal dollars to procure the most marginal wins; conversely, an unsuccessful team would overspend to procure a relatively few number of wins. They wasted their money.

Here are the numbers for the 2012 season. The formulas are not too complex, but they bear some explanation.

We begin with payroll numbers from the USA Today database, considered to be the most reliable out there. We then list the team’s winning percentage. MWs refers to Marginal Wins: the assumption is that a terrible team made up of minimum-wage players would win a third of their games, and both the Houston Astros and Chicago Cubs came dangerously close to this baseline. We’re calculating 25 players on an active roster plus three on injured reserve, with an MLB minimum salary of $480,000. MP refers to Marginal Payroll; the amount a team spends beyond the MLB minimum of $480,000 per player on a 25-man roster with three on injured reserve. CPMW refers to cost per marginal win: marginal payroll divided by marginal wins. In this ranking, the poorest-performing teams are at the bottom; the better-performing teams are at the top.

TEAM

PAYROLL

WIN

MWs

MP

CPMW

Oakland Athletics

$55,372,500

0.580

45.4

$41,932,500

$924,438

Tampa Bay Rays

$64,173,500

0.556

41.5

$50,733,500

$1,223,319

Washington Nationals

$81,336,143

0.605

49.4

$67,896,143

$1,374,138

Cincinnati Reds

$82,203,616

0.599

48.4

$68,763,616

$1,419,621

San Diego Padres

$55,244,700

0.469

27.4

$41,804,700

$1,526,945

Baltimore Orioles

$81,428,999

0.574

44.4

$67,988,999

$1,531,698

Atlanta Braves

$83,309,942

0.580

45.4

$69,869,942

$1,540,343

Pittsburgh Pirates

$63,431,999

0.488

30.5

$49,991,999

$1,641,450

Arizona Diamondbacks

$74,284,833

0.500

32.4

$60,844,833

$1,877,927

Kansas City Royals

$60,916,225

0.444

23.3

$47,476,225

$2,035,161

Los Angeles Dodgers

$95,143,575

0.531

37.4

$81,703,575

$2,183,303

Chicago White Sox

$96,919,500

0.525

36.5

$83,479,500

$2,290,247

San Francisco Giants

$117,620,683

0.580

45.4

$104,180,683

$2,296,752

Texas Rangers

$120,510,974

0.574

44.4

$107,070,974

$2,412,160

Milwaukee Brewers

$97,653,944

0.512

34.3

$84,213,944

$2,452,072

St. Louis Cardinals

$110,300,862

0.543

39.4

$96,860,862

$2,460,521

Toronto Blue Jays

$75,489,200

0.451

24.5

$62,049,200

$2,536,555

Seattle Mariners

$81,978,100

0.463

26.4

$68,538,100

$2,595,550

Detroit Tigers

$132,300,000

0.543

39.4

$118,860,000

$3,019,357

New York Mets

$93,353,983

0.457

25.4

$79,913,983

$3,142,014

Cleveland Indians

$78,430,300

0.420

19.4

$64,990,300

$3,343,122

Los Angeles Angels

$154,485,166

0.549

40.3

$141,045,166

$3,496,583

New York Yankees

$197,962,289

0.586

46.3

$184,522,289

$3,982,610

Colorado Rockies

$78,069,571

0.395

15.4

$64,629,571

$4,199,452

Minnesota Twins

$94,085,000

0.407

17.3

$80,645,000

$4,652,417

Philadelphia Phillies

$174,538,938

0.500

32.4

$161,098,938

$4,972,189

Miami Marlins

$118,078,000

0.426

20.4

$104,638,000

$5,126,298

Chicago Cubs

$88,197,033

0.377

12.5

$74,757,033

$5,993,028

Houston Astros

$60,651,000

0.340

6.5

$47,211,000

$7,285,648

Boston Red Sox

$173,186,617

0.426

20.4

$159,746,617

$7,826,113

The lesson: spending on payroll certainly doesn’t equal success. Five of the top seven teams on the list made the playoffs; committing to youth and keeping payrolls down made the teams financial successes when it came to performance on the field. Six of the seven teams managed to notch more than 44 marginal wins and spent less than $1.5 million per marginal win. (San Diego is the outlier; it’s on the list only because its payroll was the lowest in baseball.)

In this case, the clear leader is the Oakland Athletics, as GM Billy Beane managed once again to put together a winner with limited resources. But we’d argue the clear winner is Washington, where the Nationals front office managed to spend relatively little on marginal wins while at the same time boosting attendance by 21 percent.

At the bottom of the list, the 12 teams spending the most per marginal win had to be disappointed with their seasons, save the Yankees and the Tigers. The Yankees really are impervious to analyses like these; the team’s payroll is what it is and the team’s revenue structure makes spending on marginal wins a meaningless number. The same goes for Philadelphia, the Red Sox and the Angels: fans cram their home ballparks and view their broadcasts no matter what.

But for the Twins, Marlins, Astros and Rockies, these numbers are deadly. All four teams had disappointing seasons at the box office, and all four team are in markets where there’s lot of competition, so efficient spending on winning is all.

Obviously there are limits to this kind of analysis. Payroll is a crude measure; just as important, we’d argue, is revenue, but MLB teams zealously guard revenue data, so we can’t throw it into the equation. In general, a large-market team will generate more revenue than a small-market team — duh! — but there are many shades between a New York Yankees and a Kansas City Royals when it comes to revenues, and there’s some fluidity in where a team ranks in revenue production among its peers. Of course, that’s a whole other can of worms.

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